SHORT-TERM OVERREACTION OF ISLAMIC STOCKS TO SPECIFIC EVENTS IN INDONESIA
Overreaction is a phenomenon caused by stock market inefficiencies and also a reaction of certain events. Das and Krishnakumar (2016) explain that there are some overreaction phenomenon that violate the theory of capital market efficiency. Market inefficiency is an event that might occurs in various stocks, islamic stocks are probably experience market inefficiencies. This study aims to analyze the phenomenon of overreaction in Islamic stocks as well as factors that influence the phenomenon by using two stages of testing method: two paired sampling and cross sectional regression. The events taken in this study are ten events that occurred in 2013-2018. There are ten specific events which followed by price reversal and return reversal. The results showed that the event of Donald Trump election as the US President (Event 7) and the act of terrorism in Surabaya (Event 9) is proven to be significant of overreaction phenomenon in the winner stock category. The factors that influence the two events are different. The overreaction phenomenon of Donald Trump's election as the US President proved to be significantly influenced by information leakage, while the event of terrorism in Surabaya is significantly affected by the company's ownership category. These results indicate that Islamic stocks still have several transactions which prohibited by the DSN MUI fatwa in the short term.
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